Spain – the fifth victim to fall in Europe’s arc of depression

Monday, November 21, 2011

By Paul Martin

Let us all extend our sympathies to the Spanish people. They face the greatest national emergency since the Civil War yet their vote for drastic change is palpably useless, even if democracy has in this case at least been respected.

As union leader Javier Dos put it, the EU-imposed austerity plans of the incoming Partido Popular are “nothing more than the continuation of policies leading Europe toward disaster”.

The new government of Mariano Rajoy has precious few policy levers at its disposal and cannot alone do anything at this late stage to prevent a death spiral within the strait-jacket of EMU.

The immediate destiny of his country lies entirely in the hands of Germany, the AAA creditor core, the EU authorities, and the European Central Bank, the nexus of policy-making power that together dictates whether Spain will be thrown a lifeline or be pushed further into depression and social catastrophe.

What can the quiet Galician do to stop Spain’s 22.6pc unemployment rate – or 46pc for youth – from ratcheting higher this winter as the combined effects of fiscal austerity and a credit crunch together do their worst? How can he stop real M1 deposits contracting at a 5pc rate.

Spain is a disquieting story for northern neo-Calvinists, still clinging their morality tale of what went wrong with monetary union, a belief that feckless Greco-Latins borrowed their way to disaster, and that Teutonic virtue for all is the path to redemption.